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South Africa has been facing concerning economic challenges. And we've all already felt the real and knock-on effects of all the fuel price hikes especially this year.
Then we got the thumbs down from the World Bank for our GDP growth.
But is this current economic difficulty likely to affect the shopping habits of South Africans? Will I have to change the way that I spend and save even more?
Senior economist at NKC African Economics, Elize Kruger, said she does expect consumers to continue to tighten their belts following the most recent "fuel price shock" on Wednesday.
It is already known that fuel price increases don’t only affect the costs of car owners but affects all costs associated with fuel use.
“Everything that needs to be transported via road has the risk of becoming more expensive,” said Elize.
According to her, the extent of fuel price increases has been quite significant, with it being 25% higher than it was in March this year.
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“Discretionary spending will be hit which could include cosmetic products, clothing and footwear, recreation and entertainment, and most likely fast foods and dining will become a real luxury,” said Elize.
She added that couriers would also feel the pinch and will probably increase delivery costs as well.
“[It’s] important to look at the fuel price cumulatively over the past seven months… with the cumulative increase about R3.30/litre higher in seven months, the drain on households disposable income would be clearer understood,” she said.
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Elize spoke about a possible secondary impact that may further impact the prices of locally produced items among others.
“Now, question remains… What company can completely absorb such an increase in input costs? Thus, here lies a particularly large risk for a secondary impact on prices i.e. not only the higher fuel prices in the CPI basket (direct impact), but a generalised increase in prices due to the higher fuel prices (secondary impact),” she said.
With this and the forecast from the World Bank, the economic environment is becoming harder and harder for our pockets.
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Fin24 reported that the World Bank reduced its estimate for the South African GDP expansion to 1% this year from 1.4%. This was in addition to the overall decrease for the sub-Saharan Africa region, which the World Bank reduced its forecast for economic growth because of the external environment that becomes less favourable due to escalating global trade risks and weakening demand for the area’s products.
Elize also mentioned that fuel increases in South Africa are mainly driven by the rand to the U.S. dollar, the international oil price and government taxes and levies.
“[It’s] not easy to forecast, but [it is] quite reasonable to expect that more hikes could be in the making, especially with oil at $85/bbl. (about R1253 per barrel),” said Elize.
So what will I be doing to make sure that I can still afford my favourite hair products? Or the next trip to the vintage store in the neighbourhood? Watch this space for tips.
In the meantime, if you don't already have one, use this personal budget planner from Fin24 to help you calculate what you're currently spending.
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